Correlation Between Visa and Japan Exchange

Can any of the company-specific risk be diversified away by investing in both Visa and Japan Exchange at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Visa and Japan Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Class A and Japan Exchange Group, you can compare the effects of market volatilities on Visa and Japan Exchange and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Visa with a short position of Japan Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Japan Exchange.

Diversification Opportunities for Visa and Japan Exchange

-0.43

Correlation Coefficient

Visa  Japan Exchange

Very good diversification

The 3 months correlation between Visa and Japan is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Japan Exchange Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Exchange Group and Visa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Visa Class A are associated (or correlated) with Japan Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Exchange Group has no effect on the direction of Visa i.e., Visa and Japan Exchange go up and down completely randomly.

Pair Corralation between Visa and Japan Exchange

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.4 times more return on investment than Japan Exchange. However, Visa Class A is 2.48 times less risky than Japan Exchange. It trades about 0.08 of its potential returns per unit of risk. Japan Exchange Group is currently generating about -0.12 per unit of risk. If you would invest  31,185  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  394.00  from holding Visa Class A or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Japan Exchange Group

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Japan Exchange Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Exchange Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Japan Exchange is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Japan Exchange

The main advantage of trading using opposite Visa and Japan Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Japan Exchange can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Japan Exchange will offset losses from the drop in Japan Exchange's long position.

The idea behind Visa Class A and Japan Exchange Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.